Zee Telefilms has hit a rough patch in recent sessions, especially after the company issued a cautious guidance for Q4 on account of the Cricket World Cup.

From a recent high of Rs 104.35 touched on 9 January 2003, the stock of the media major has declined by 17.48% on sustained weakness. Even the average daily volumes on the Zee Telefilms counter on the BSE have declined steadily from around 3 million shares to less than 1.5 million shares in the same period.

The slide in share price and average daily volumes on the counter have been attributed to the cautious Q4 guidance issued by the media major at the time of announcing its Q3 results.

For the quarter ended 31 December 2002, Zee Telefilm's consolidated net profit jumped by 36% to Rs 70.88 crore on a 9.89% rise in total income to Rs 325.02 crore (Rs 3.25 billion).

Both net profit as well as net sales were in line with analysts' expectations. A capitalmarket.com poll of five media analysts projected net profit somewhere between Rs 59 crore and Rs 74 crore and net sales in the range of Rs 321 to Rs 351 crore (Rs 3.21-3.51 billion).

Advertisement revenues were 2% lower at Rs 171.01 crore (Rs 1.71 billion). They contributed 55.6% of the company's revenues (62.8% of revenues in the quarter ended December 2001). However, it was the ETC channel which drove the advertisement revenues during the quarter. Zee's advertising revenues (excluding ETC) declined by 8.9% as compared to the corresponding previous quarter. The management maintained that the market continues to be sluggish and remained very competitive during the festival season. The advertising spends were tighter, compared to the previous year. Yet, the ‘Thursday Premiere' initiative helped in arresting a possible slide in revenues.

On a stand-alone basis, for the quarter ended 31 December 2002, Zee Telefilms recorded a net profit of Rs 22.19 crore on total income of Rs 141.13 crore.

Looking ahead, Zee's outlook on the advertising front remains negative. "In the fourth quarter of FY 2002-03, there is low visibility in the advertising revenue scenario because of the Cricket World Cup. There could be an impact on the business of Zee because of shift of advertising revenues to cricket, particularly during the duration of the cricket matches," the company said in a statement.

The downbeat outlook led to the Zee Telefilms scrip turning slippery. The Cricket World Cup commences on 10 February and ends on 23 March 2003. Since Zee does not have sports content (especially cricket) to back upon during the fourth quarter, it can affect the company's advertising revenues during the fourth quarter.

The Zee Telefilms scrip's fortunes have also been hit, after the promoters' plan to pledge equity to raise a loan of $40 million hit a roadblock. There were reports that the Securities and Exchange Board of India had written to the Foreign Investment Promotion Board to put on hold a proposal by the promoter group of Zee Telefilms, to pledge five crore ZTL shares with Credit Suisse First Boston, pending investigation into alleged irregularities in certain transactions of the company and its promoter.

Sebi said that it has not completed the investigation in respect of the alleged rigging of Zee Telefilms' shares during the stock market scam of 2001. The market regulator is said to be looking into several issues, including the alleged use of inter-corporate deposits to fund certain friendly brokers who, in turn, helped control the market price of the ZTL stock. Sebi also directed the domestic exchanges not to include ZTL in the extended list of stocks for trading in the derivatives segment of the bourses.

Meanwhile, ZTL intends to revamp its advertising rate card from 1 April 2003. The company is likely to implement a new system that will bring in transparency into the advertising business. There are also plans to revamp the Zee group's education business managed by Zee Interactive Learning Systems.

The company is also planning to re-launch its music channel with a new look and feel by this month end.

According to a report in a section of the media, the Zee network has invested around Rs 5 crore to make the revamped music channel highly interactive and get the viewer more involved with the channel.

BSE Code: 505537